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Qwest shares drop amid broadband concerns
By Andy Vuong
The Denver Post
Friday, October 11, 2007

Qwest shares dropped 5 percent Wednesday after a Wall Street analyst downgraded the company, citing a slowdown in broadband-subscriber growth.

UBS analyst John Hodulik also said in the note that Qwest should launch a broad video strategy in 2008 to help increase revenue.

In lowering his rating on the company to "neutral" from "buy," Hodulik said the risks to Qwest's cash flow are increasing.

He said softness in consumer spending "could exacerbate (phone) line loss" and "further stifle (broadband) growth."

Qwest and other Baby Bells continue to lose land-line customers to cable operators such as Comcast.

Qwest stock closed Wednesday at $8.85, down 49 cents.

Hodulik said he expects Qwest to announce a dividend soon and that the company should launch a broad Internet Protocol TV offering by running fiber-to-the-neighorhood in 2008.  The other Baby Bells, Verizon and AT&T, are in the midst of their own fiber rollout.

"Difficulties achieving top-line growth may also provide additional incentive for new management to pursue" an IPTV strategy in 2008, Hodulik wrote.

He estimated the strategy could cost Qwest $1.8 billion over three years to upgrade its infrastructure and reach 6 million homes -- half the homes in its 14-state phone- service territory -- with the TV service.

Qwest spokeswoman Diane Reberger declined to comment, citing a quiet period for the company as it prepares to announce second-quarter earnings Oct. 30.

Andy Vuong: 303-954-1209 or avuong@denverpost.com

http://www.denverpost.com/business/ci_7141988